QUIZ – FY Trading Update
- No deterioration since the last update on 7th March
- Slight revenue beat against forecasts
- YoY sales growth across every channel, including stores / concessions
- 58% growth from QUIZ’s own websites
- Suppliers unaffected by Debenhams plc administration
- Debenhams contributed 23% to overall revenues (this is over the year, not a year-end run-rate). In the best case these sales will reduce over the next 12 months as stores close – based on current plans total revenue looks to fall 5-8% from this effect alone (23% x 20-35%). In the worst case the Debenham’s operating companies could still collapse resulting in significant bad debt.
- Online growth overall of 34% is relatively lackluster compared to e.g. BooHoo or ASOS at this size / stage.
- A significant majority of sales continue to be from stores. Most sales are from UK stores.
- No news of efforts towards closure of stores / concessions until 11th June.
- No news on current cash
FY2019 forecasts of 3.3p EPS are now secure. FY2020 forecasts of 3p look like a reasonable best guess, although highly dependent on the store review and there may be some exceptional closure costs. Forecast revenue growth requires online to add more sales than it did over the last year without too much tailing off in percentage growth.
On a normal valuation metrics they appear cheap, especially when cash adjusted. However Bonmarche has shown us how quickly trading can deteriorate, how seasonal cash can be and how quickly it can be consumed. For me, the main distinguishing factor from Bonmarche is the Operating Margin which runs at approximately double what they achieved.
The share price was not affected by events over the last couple of weeks at Debenhams and so this . There may be a small relief rally as trading has not deteriorated further, but the market will then start looking forward to the outcome of the review on 11th June.
I have a small holding. I will be looking for further price weakness or less FY2020 uncertainty before adding.